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# examchap14 - Folk Exam Questions Chapter 14 1 Zernoni...

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Folk Exam Questions - Chapter 14 1. Zernoni Company's net income last year was \$225,000 and its interest expense was \$30,000. Total assets at the beginning of the year were \$1,950,000 and total assets at the end of the year were \$1,830,000. The company's income tax rate was 30%. What was the company's return on total assets for the year? Solution: Return on total assets = [Net income + (Interest expense x (1 – Tax rate)] ÷ Average total assets Return on total assets = [\$225,000 + (\$30,000 x (1 – .30)] ÷ [(\$1,950,000 + \$1,830,000) ÷ 2] Return on total assets = (\$225,000 + \$21,000) ÷ \$1,890,000 = 13.0% 2. Selected financial data for Spelling Company appear below: Account Balances End of Beginning Year of Year Common stock \$1,200,000 \$900,000 Preferred stock 375,000 375,000 Retained earnings 555,000 225,000 During the year, the company paid dividends of \$30,000 on its preferred stock. The company's net income for the year was \$360,000. What is the company's return on common stockholders' equity for the year? Solution:

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examchap14 - Folk Exam Questions Chapter 14 1 Zernoni...

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